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Banking is a necessary part of modern-day living. And on the surface, it seems easy. Pick a bank, put your money in it, and use it at your convenience. They’ll even be there for you to borrow cash for a car or home.
Yet what you don’t know about banks can hurt your financial situation. Here’s how 11 common banking mistakes may be costing you big.
Sticking With What You’ve Got
Most people stick with the bank accounts they have and never bother checking out the competition. That’s usually because your bank is in your neighborhood, and it’s convenient. You’ve been there for years – why change now? That line of thinking could be costing you money.
Banks offer promotions and deals to attract new customers. When a customer has been with them for years, the bank already has their money, so there’s no need for pursuing. If you haven’t shopped around before, spend a few minutes doing so, and you could wind up with lower fees, better interest rates, and maybe even a sign-up bonus.
Paying Monthly Service Fees
It’s your money; why should you pay a bank to keep it in an account? Yet surprisingly, a great many banks provide checking accounts with monthly service fees. This means the bank is collecting a fee every month just to give you the privilege of having an account.
With so many banks out there, it’s easy to find one that offers no-fee checking. Just be sure to read the fine print before you transfer your money.
Leaving Your Money In No or Low-Yield Accounts
Many checking accounts on the market today give you either zero interest or a low yield. That provides little to no earnings on your money.
In order to better manage your finances, keep enough cash in your checking account for monthly bills, and move the rest to a savings account that gains interest. High-yield savings accounts will offer higher interest rates to help your money grow a bit faster. Finding a relatively safe ETF or mutual fund is even better.
Searching Out Higher Rates
If you’re looking for better interest on your accounts, don’t start chasing the best deals. Constantly moving your money around can cost you more than you make.
Most banks have closing and opening fees associated with their accounts. Depending on your dollar amount and the fee percentage, you could lose more than you’ve gained from those attractive rates. A better strategy is to find an account with reasonable interest, given your situation. Then make regular contributions and watch your money grow.
Paying Overdraft Fees
Many banks offer overdraft protection to cover payments made when you don’t have enough in the account. The transaction goes through – along with a high overdraft fee that can be as much as $50.
You can avoid these fees with a bit of planning. Schedule your monthly payments to ensure you have enough money in the account to cover them. With online banking, you can check your account balance at any time and move funds from savings to checking to ensure you never overspend your balance.
Paying ATM Fees
How many times do you stop at an ATM to make a deposit or take out cash? Many accounts limit the number of ATM transactions you can make per month. Others may assess fees if you use an ATM that’s out of network.
If you use ATMs regularly, start looking for a bank that offers you more convenience without the fees. Better yet, consider moving to online banking, where you can bank without any fees at all.
Not Considering Digital Banks
The fintech industry is growing by leaps and bounds, and these digital banking options can offer many services that more traditional banks can’t. You’ll have to do your banking online with a website and an app, so there won’t be a teller to talk to or a brick-and-mortar branch to visit. Still, if you have standard needs and simply want a safe place to put your money, you may find a great banking alternative.
Paying Bills Manually
If you’ve ever had a late bill payment because a check got lost in the mail, it’s time to automate the process with online bill pay. It’s a great way to save on late fees and ensure your payment gets there on the due date. It’s also less expensive because you can stop buying stamps, checks, and envelopes. Schedule your payments, and you’ll never have to consider writing out your bills again.
Not Taking Rewards
If you pay attention, you’ll find plenty of banks offering rewards. Take advantage of the extra cash-back offers or the lower fees for specific accounts. Talk with your existing bank, and you may find that many offer lower service fees if you open more than one account. It’s worth a quick conversation to understand the rules established by your bank and make the most of them.
Not Checking Your Monthly Statement
When everything is online, it’s easy to ignore your monthly statements and not bother looking at your transaction history. This can allow multiple fees to be assessed without you knowing about them. A few extra minutes a month could save you a lot of money.
Overlooking Credit Unions
While banks are the most common financial institutions, it might be worth checking out your local credit union as an alternative. Credit unions are set up differently than banks in that they are nonprofit organizations and gain financial power from the collective money of their members. You’ll have to meet eligibility requirements, but you’ll typically enjoy better interest rates once you’re in. And they usually offer all the services most consumers need, from checking and savings accounts to auto and home loans.